Compliance Q&A: Regulation D and Reserve Requirements

I have a quick question related to Regulation D and reserve requirements. If we offer commercial escrow services to hold funds for two or more parties, are these funds held in escrow generally subject to Reg. D?

Answer:

Yes, escrow funds are specifically included in the definition of “deposits” for purposes of Regulation D: §204.2 Definitions.

For purposes of this part, the following definitions apply unless otherwise specified:

(a)(1) Deposit means:

…

(ii) Money received or held by a depository institution, or the credit given for money or its equivalent received or held by the depository institution in the usual course of business for a special or specific purpose, regardless of the legal relationships established thereby, including escrow funds, funds held as security for securities loaned by the depository institution, funds deposited as advance payment on subscriptions to United States government securities, and funds held to meet its acceptances;
12 CFR § 204.2(a)(1)(ii) https://www.ecfr.gov/cgi-bin/text-idx?SID=8ddd88a51a067ba79f787e95219009c7&mc=true&node=se12.2.204_12&rgn=div8